A complete guide to ratified contracts

2 May, 2024
paresh
Paresh @Boloforms
8 min read
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Ratified contracts are frequently employed in real estate transactions and represent a legally enforceable agreement that both the buyer and seller have initially agreed to, often after negotiations and the signing of a purchase offer.

This type of contract may still hinge on various contingencies or conditions, such as successful property inspections, financing approvals, or satisfactory appraisal outcomes.

Once all these contingencies are addressed or dismissed, and both parties reaffirm their agreement to the established terms, the contract is deemed ratified.

From that point forward, it becomes a fully binding agreement, where any failure to follow through or breach of the contract's terms can lead to legal repercussions.

Important pointers discussed:

  1. Simply signing a contract doesn't mean it's legally binding until it's ratified.
  2. While you can validate a voidable contract through ratification, a contract that's inherently void cannot be ratified.
  3. Ratification entails unanimous agreement on all terms and conditions by all involved parties.
  4. In real estate, even after ratification, finalizing a contract may involve navigating through several procedural steps.

What is a ratified contract?

Ratification of a contract is the formal process by which all parties involved confirm their acceptance and agreement to the terms and conditions outlined in the contract. It essentially means that each party has reviewed the terms, agreed to them, and given their consent to be bound by the contract.

The process of ratification typically involves explicit actions or statements from each party indicating their intention to be bound by the contract. This can include signing the contract document, exchanging signed copies, or providing verbal or written confirmation of acceptance.

Once a contract is ratified, it becomes legally binding and enforceable. This means that if any party fails to fulfill their obligations as outlined in the contract, the other party/parties may seek legal remedies for breach of contract.

In some cases, especially in complex transactions like real estate deals, ratification may require additional steps or formalities to be completed before the contract is considered fully executed and enforceable. These steps could include obtaining necessary approvals, fulfilling certain conditions precedent, or completing specific legal formalities required by law or industry regulations.

When might I need a ratified contract?

Ratified contracts are used in various situations where parties want to formalize their agreement and create legally binding obligations. Here are some common scenarios where ratified contracts are needed:

When might I need a ratified contract?
  1. Real Estate Transactions: Buying, selling, or leasing property often involves ratified contracts to ensure all parties agree to the terms of the sale or lease, including price, conditions, and timelines.
  2. Employment Agreements: Contracts between employers and employees outlining terms of employment, such as salary, benefits, job responsibilities, and termination conditions, typically require ratification.
  3. Business Contracts: Any agreement between businesses or individuals for goods or services, such as vendor agreements, service contracts, or partnership agreements, usually requires ratification to ensure both parties are bound by the terms.
  4. Loan Agreements: Contracts for loans or financing, whether between individuals, businesses, or financial institutions, require ratification to establish the terms of the loan, including repayment schedules, interest rates, and any collateral.
  5. Intellectual Property Licensing: Contracts for licensing intellectual property rights, such as patents, trademarks, or copyrights, often require ratification to establish the terms of use, royalties, and any restrictions.
  6. Construction Contracts: Agreements between property owners and contractors for construction projects typically require ratification to establish project scope, timelines, costs, and quality standards.
  7. Partnership Agreements: Contracts between partners in a business venture outlining their respective rights, responsibilities, profit-sharing arrangements, and dispute-resolution mechanisms typically require ratification.
  8. Sales Contracts: Contracts for the sale of goods, whether between businesses or consumers, require ratification to establish the terms of the sale, including price, quantity, delivery terms, and warranties.

In essence, ratified contracts are used in any situation where parties want to formalize their agreement and ensure the legal enforceability of the terms and conditions agreed upon. They provide clarity, security, and protection for all parties involved in the transaction or relationship.

How to ratify a contract

The process of a contract ratification goes like this:

How to ratify a contract
  1. Review: Begin by thoroughly reviewing the contract, ensuring you understand all terms and conditions outlined within it.
  2. Comprehension: Take the time to fully comprehend the implications of ratifying the contract. Understand that ratification implies acceptance of the entire contract, not just certain parts.
  3. Acceptance Method: Determine how your acceptance of the contract will be communicated. Will it be through a written acknowledgment or implied through your actions?
  4. Legal Obligations: Recognize that once the contract is ratified, you are legally bound to fulfill your responsibilities as outlined within it.
  5. Effective Date: Note that the date of ratification may not coincide with the contract's validity date. Ratification may retroactively validate the contract from its signing date.
  6. Authorization: Ensure you have the authority to ratify the contract, especially in scenarios involving corporations where shareholder agreement may also be necessary.
  7. Voluntary Action: Ratification should be a voluntary decision. You should not be unduly influenced or coerced by any party into ratifying the contract.
  8. Right of Refusal: Understand that you have the right to refuse ratification if you disagree with any terms or conditions. This allows you to revisit negotiations or choose not to proceed with the contract.

When is a contract considered ratified?

A contract is considered ratified when all parties involved have agreed to its terms and conditions. Ratification signifies formal acceptance and acknowledgment of the contract's provisions, creating a legally binding agreement.

The exact moment when a contract is considered ratified can vary depending on the circumstances and the specific terms outlined in the contract itself. In some cases, ratification occurs when all parties sign the contract document, indicating their consent to be bound by its terms. In other situations, ratification may occur through verbal agreement, exchange of emails confirming acceptance, or even through implied acceptance by actions taken in accordance with the contract.

Once ratified, the contract becomes legally enforceable, and all parties are obligated to fulfill their respective obligations as outlined within its terms. It's essential for parties to ensure that ratification occurs in accordance with any specified requirements or conditions laid out in the contract to avoid any misunderstandings or disputes regarding its validity.

Can I ratify a voidable contract?

Yes, you can ratify a voidable contract.

A voidable contract is one that is initially valid and enforceable but can be legally voided or canceled by one of the parties due to certain circumstances, such as fraud, duress, undue influence, or incapacity. However, even though the contract is initially voidable, if the party with the right to void the contract chooses not to do so within the specified timeframe or waives their right to void it, the contract can be ratified.

Ratification of a voidable contract occurs when the party with the power to void the contract voluntarily chooses to affirm or confirm the contract's validity, either explicitly or implicitly. This affirmation can happen through actions, such as continuing to perform under the contract, or through explicit statements or conduct indicating acceptance of the contract's terms.

Once ratified, a voidable contract becomes fully enforceable, and the party who initially had the right to void it is no longer able to do so. It's important to note that ratification of a voidable contract effectively removes the grounds for voiding the contract in the future.

The difference between voidable vs. void contracts

Difference between voidable vs. void contracts

What happens after a contract is ratified in real estate terms?

After a real estate contract is ratified, meaning all parties involved have agreed to its terms and conditions, several steps typically follow to finalize the transaction:

What happens after a contract is ratified?
  1. Escrow Opening: The ratified contract is often forwarded to a neutral third party, such as an escrow officer or real estate attorney, who opens an escrow account to hold funds and documents related to the transaction.
  2. Earnest Money Deposit: The buyer may provide an earnest money deposit, which is a sum of money demonstrating their commitment to the purchase. This deposit is typically held in escrow until closing.
  3. Due Diligence: Both the buyer and seller proceed with any due diligence activities specified in the contract, such as property inspections, title searches, and obtaining financing approval.
  4. Contingency Period: If the contract includes contingencies, such as the buyer obtaining financing or the property passing inspections, these contingencies must be satisfied within the specified timeframe.
  5. Loan Approval: If the buyer is obtaining financing, they work with their lender to secure final loan approval and complete any remaining loan documentation.
  6. Title Examination: The title company conducts a thorough examination of the property's title history to ensure there are no outstanding liens or encumbrances that could affect the sale.
  7. Closing Preparation: Once all contingencies are satisfied, and financing is secured, the parties prepare for the closing by gathering necessary documents and funds.
  8. Closing: The closing meeting is scheduled, where the buyer, seller, and any relevant parties (such as real estate agents, attorneys, and lenders) come together to sign the final documents and complete the transfer of ownership.
  9. Funding: The buyer's lender disburses the loan funds, if applicable, and any additional funds required to complete the purchase are transferred to the appropriate parties.
  10. Recording: After closing, the deed and other relevant documents are recorded with the appropriate government office to officially transfer ownership of the property.
  11. Possession: Finally, the buyer takes possession of the property, and the transaction is considered complete.

Throughout this process, communication and coordination among all parties involved are crucial to ensure a smooth and successful real estate transaction.

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Conclusion

In conclusion, understanding ratified contracts is essential for anyone entering into legal agreements. By grasping the concept of ratification, individuals can ensure that their contracts are legally binding and enforceable. From the initial formation to the final execution, each step plays a crucial role in solidifying the terms of the agreement. Remember to always seek professional advice when navigating complex contractual matters, and utilize tools like BoloForms Signature to streamline the process. With diligence and attention to detail, you can confidently navigate the world of ratified contracts and protect your interests effectively.

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